KATHMANDU: The International Monetary Fund (IMF) has concluded that Nepal’s economic growth performance has weakened in the last three months.
“Nepal’s economic growth performance has weakened since the IMF annual Article IV consultation in November‚ owing both to external factors and domestic considerations‚” said IMF mission chief for Nepal Todd Schneider at the conclusion of his visit‚ here yesterday.
“Nepal’s trade partners‚ particularly India‚ are growing more slowly than was expected at that time‚” he said‚ adding that agricultural output has weakened due to the delayed monsoon. “Domestic factors are also important‚ particularly the uncertainty related to the budget‚ which has contributed to significant under-execution of spending plans thus far in the current fiscal year 2012-13.”
Lack of clarity about the legal status of spending appropriations in the current fiscal year’s budget means the government is likely to register a significant surplus in 2012-13‚ he added. “The tight fiscal stance is unfortunate as it will depress an already slowing economy.”
Inflation remains stubbornly high‚ while the external current account surplus has diminished‚ according to the IMF that has projected Nepal’s trade deficit to rise‚ as imports have risen and exports declined — in dollar terms — during the first five months of the current fiscal year. “Remittance flows continue to increase but at a slower pace‚ which have bolstered household incomes‚ but also served to finance imports of non-durable consumer goods.”
The mission urged government to take steps to accelerate high quality spending‚ both for poverty-alleviation and public capital investment. “Adoption of a full-year budget ordinance for 2012-13 would be welcome even at this late stage of fiscal year‚” the mission said‚ saying that equally important is early approval of a budget ordinance for the next fiscal year 2013-14.
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